Lord Turner put the cat amongst the pigeons in proposing what very much sounded like a version of a Tobin Tax on financial transactions a few weeks ago. His basic argument was that the way to curb bonuses was not to perfume the stench but rather to drain the swamp, i.e. reduce the profits of socially useless banks.
Amazingly, the IMF is now also on the case. They worry about the impracticalities of a Tobin Tax. However, Dominique Strauss-Kahn, the IMF managing director has tasked his deputy, John Lipsky with looking at the possibility of introducing some sort of insurance levy to build a fund to cope with the fiscal consequences of bank collapse.
While the fund would clearly be used to help developing countries service their debts in the event of a widespread loss of liquidity in the main, would it not be right that such a fund could be used to help others who shoulder a great deal of risk through the size of the international financial markets that locate on their shores? The UK and Ireland are obvious examples.
It will be interesting to see how this discussion develops and how the insurance approach will be less avoidable by financial institutions than the tax approach, also favoured by the French president, Nicolas Sarkozy.
There is still much to do to combat the risks of financial collapse that proposed reforms have not diminished significantly enough. I still fail to see why an EU wide separation of the risky parts of the financial system from the parts that look after our money is not being properly considered. As long as Paris, London, and Frankfurt were in on the act- as they would be if it was an EU directive- it should be doable. And don't even start me on credit ratings agencies.....